For example, one trader needs 50.000 yen for guarantee funds to buy a million dollars. However, they do not bother to pay the money. It means that you can buy if you have guarantee funds more than 50.000 yen in the account for trade. In other word, it can be said to be collateral.

If a dollar is 100 yen, a million dollars can be equal to 1.000.000 yen . And if there is only 1.000.000 yen as guarantee funds trader decide in the account. You are limited to buy a million dollars. In this case, leverage is 1 time. So it turns out that the trader does not have effect of leverage. If guarantee funds are 500.000 yen per a million dollars, It is possible to buy in 2 times leverage. What about 100.000 yen? It is possible to buy in 10 times leverage.

In the case, you have 1.000.000 yen in your bank balance.

1.000.000 yen, minimum guarantee funds---1 time leverage---buying limitation is a million dollars.

100.000 yen, minimum guarantee funds---10 times leverage---buying limitation is $100.000.

50.000 yen, minimum guarantee funds---20 times leverage---buying limitation is $200.000.

It is also general case for some traders to have standard percentage for rates, not fixed amount. For example, if there is one trader whose minimum guarantee funds are 3 % and a dollar is 100 yen, you would need 30.000 yen for a million dollars as guarantee funds. If the exchange rate increases up to 120 yen, the funds also increase up to 36.000 yen.

Well, it may happen that exchange rates change drastically. It may be cased by coups terror and rapid shift of crude oil price. When there is too much rapid movement, it may be inadequate to have only guarantee funds as collateral. So, it still can be happened that guarantee funds can not compensate loss.

If total amount of guarantee funds is 1.000.000 yen, you would buy $100.000 for 100 yen to the dollar exchange rate. And, if the rate of yen gradually decreases down to 90 yen, You would lose 1.000.000 yen as a latent loss in total. At this point, guarantee funds is over and the bank balance is zero. If there is zero, trader would sell 90 yen to the dollar and make "square" not to lose any more.

In fact, there is spread that is the difference between selling price and buying price. So, 90.05 yen near 90 yen is really zero point. In this case, a customer loses full 1.000.000 yen as guarantee funds. Trader can make profit as just only charge. An actual utilization is a bit different. But basic factor of guarantee funds is just like that.

What if big crash happens? When guarantee funds become zero and traders try to balance with closed trade. What if the decline continues more and decreases down to 85 yen and 80 yen? Even though the limitation covered by minimum guarantee funds is only 90 yen for a dollar. Of course, traders miss much. But, it is quite difficult for trader to say "please concentrate your share of loss" to their customers. It may happen that they do not pay.

As there is such a danger, traders do not wait until full guarantee funds become zero. Even it is case by case. For example, if latent loss of guarantee funds increases up to 50%. At this point, the position is automatically closed-balance your account forcibly-.

Such a limited cost is called as keeping deposits. It nails latent loss having possibility to increase down present loss, and prevent increasing more loss. As a result, total amount in your account is prevented to be nothing. Even if it is closed, logically, you can still expect to have keeping deposits in your account. Please note that means "logically".

Position close dividing keeping deposits (forced clearance) is called as "loss cut". If you buy fully in trader whose minimum guarantee funds are 50.000 yen and keeping deposits are 50%. It would be "loss cut"with 25.000 yen of latent loss. That kind of thing is the most complicated part in FX. There are 3 key words, minimum guarantee funds, keeping deposits, and loss cut. If you can make sense meaning of the words, it can be said that you can get the know-how of FX.

Loss cut is usually implemented without any arguments. Kinder trader-can be nosey-warn for you "dangerous zone is just around corner!!" such a warming is called as margin call.

For example, if your condition does not come good after a day you have got margin call from trader. Closed trade is forcibly implemented as expected. Therefore, a person having margin call is apt to deposit added funds or balance your minus position to decrease latent loss.

You can not increase leverage in high deposits. And if setting of keeping deposits is high, it is easy to have margin call and loss cut by just only your misunderstanding.

What important thing is that "deposits are high"and”keeping deposits are set high"are not too bad and damaging.

Therefore, if deposits are high, leverage is low and big loss is not big problem. And if keeping deposits are high, loss cut would be implemented within your loss is little. Even you made a big mistake. And the amount left in your account is bigger. Of course, there is even little latent loss; it is easier for its loss to be determined at a price. There are such as good one and bad one.

However, there are some traders whose selling point are very safe course of 2 or 5 times leverage. If limitation of leverage is 2 times, you could have position of a million dollars for funds of 500.000 yen. And if margin call is 50%, it would be fine up to 250.000 yen loss. So, you would finally get the margin call when 100 yen to the dollar exchange rate decreases down to 75 yen. There would still be about 250.000 yen left without any added deposits. This is very safe trade for a person who wants to utilize ones funds not fast.